‘Conflict Minerals’ Rule Will Burden Auto Suppliers, Economy
The Detroit News reports, “Suppliers warned about ‘conflict minerals’“:
Washington — New disclosure rules for minerals from war-torn Africa could impose a major burden on auto suppliers.
Six of the largest automakers have warned suppliers to prepare for federal regulations requiring them to disclose whether they use “conflict minerals” in auto parts.
The joint letter from the heads of purchasing from General Motors Co., Ford Motor Co., Chrysler Group LLC, Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. told suppliers that the rule will require them to disclose the use of minerals from the Democratic Republic of the Congo and neighboring countries.
Conflict minerals are defined as tin, tantalum, tungsten, or gold. The Dodd-Frank Wall Street Reform and Consumer Protection Act required the Securities and Exchange Commission to propose regulations to require public companies to supply detailed reporting of their conflict mineral controls and sourcing. Challenged by the difficulty of the task — consider the complexity of global supply chains — the SEC recently delayed implementation of the rule until the second half of this year.
The National Association of Manufacturers submitted formal comments (here) to the SEC on March 2, estimating it will cost industry $9-16 billion to put the new regulations into effect and urging the SEC and Obama Administration to conduct a more rigorous analysis of the costs. The impact on supply chains — so important to the auto industry — is a key concern. As the NAM summarized in a briefing document for the SEC:
While the new reporting mandate only applies to companies required to report to the SEC, we expect these requirements will rapidly be passed through the entire supply chain. The requirements will effectively force suppliers not subject to SEC reporting to maintain extensive records of their source materials, costing them thousands of dollars to establish and maintain these records. The NAM believes that the proposed rule is a significant rulemaking and will cost U.S. industry between $9-16 billion to implement.
This memo from Dykema Gossett addresses the central issues, as well: “Conflict Minerals Act will have widespread impact on global supply chain.”